Namyang Dairy Products to Separate Ownership and Management for Now... Long Road Ahead to Regain Consumer Trust

Chairman Hong's 51% Stake Remains Unchanged
Professional Management Recruitment Expected
Restoring Consumer Trust Is Key

[Asia Economy Reporter Seungjin Lee] Namyang Dairy Products is expected to transition from an owner-operated management system to a professional management system. On the 4th, Hong Won-sik, chairman of Namyang Dairy Products, announced that he would step down from his position as chairman and would not transfer management rights to his two sons. Furthermore, on the 3rd, Lee Kwang-beom, CEO of Namyang Dairy Products, also tendered his resignation taking responsibility for the recent situation, leaving the CEO position vacant. With the Hong family stepping down from frontline management and the CEO position vacant, Namyang Dairy Products is expected to fill the vacancy either by recruiting a new professional manager from outside or through internal promotion, but nothing has been finalized yet.

CEO Position Also Vacant

Currently, the largest shareholder of Namyang Dairy Products is Chairman Hong, holding 51.68% of the shares. His wife, Lee Un-kyung, holds 0.89%, and his younger brother, Hong Myung-sik, holds 0.45%. His eldest son Hong Jin-seok and second son Hong Beom-seok do not hold company shares, but his grandson Hong Seung-ui holds 0.06%. Although Chairman Hong and his family are stepping down from management roles, they are known to retain their shares.

However, specific plans for selecting a new CEO and renewing the management team are reportedly being prepared. Since Chairman Hong declared his sudden resignation 21 days after the Bulgari incident, it is explained that some time is needed to convene the board and reorganize the organization. A Namyang Dairy Products official stated, "Successive measures such as appointing a new CEO have not yet been decided."

The late Hong Doo-young, founder of Namyang Dairy Products, was born on June 12, 1950, in Seoul. He joined management as a director in 1977 and served as vice president from 1988 to 1990. Chairman Hong served as CEO from 1990 until 2003, when he stepped down amid allegations of receiving rebates from a construction company. Instead, he became chairman that year and has continuously exerted influence over company management as the head and an inside director.

Hong Won-sik, chairman of Namyang Dairy Products, is greeting ahead of a public apology press conference regarding the 'Bulgaris incident' at Namyang Dairy Products headquarters in Gangnam-gu, Seoul, on the 4th. Last month, Namyang Dairy Products announced at a symposium on 'Development of antiviral foods in the COVID-19 era' that the Bulgaris product was confirmed to reduce COVID-19 by 77.8%. However, the research results were reported to have exaggerated the findings from animal 'cell-level' experiments, causing controversy. In response, Hong Won-sik, chairman of Namyang Dairy Products, announced his intention to resign at the public apology press conference on the same day. Photo by Kim Hyun-min kimhyun81@

Namyang Dairy Products is the oldest private dairy company in Korea, established in 1964, and has built its reputation by producing high-quality powdered milk in the domestic market. The ‘French Cafe Coffee Mix’ launched at the end of 2010 imprinted a premium image of Namyang Dairy Products on consumers. The ‘French Cafe Coffee Mix’ was marketed as a healthy coffee mix by using milk instead of sodium caseinate, gaining popularity in the market.

However, repeated abuses of power, moral hazards by the owner family, and the Bulgari falsehood incident have led to a decline in Namyang Dairy Products’ performance. The market is responding positively, viewing this as a resolution of the ‘owner risk’ at Namyang Dairy Products. Following the news of Chairman Hong Won-sik’s resignation, the stock price surged more than 10% after 10 a.m. that day.

Expected Strengthening of ESG Management

Going forward, Namyang Dairy Products is expected to further strengthen the ESG Promotion Committee launched in March. The ESG Promotion Committee will promote ‘eco-friendly green management’ and enhance existing social contribution activities for vulnerable groups, including children and mothers. Additionally, having received the ‘highest’ rating for two consecutive years in the Fair Trade Agreement implementation evaluation, the company plans to maintain and expand various support policies for dealerships to lead a culture of coexistence.

The ESG Promotion Committee aims to reduce plastic emissions by more than 20% by 2025 in line with the Ministry of Environment’s plastic reduction policies through establishing the vision of ‘eco-friendly green management.’ Activities include removing plastic accessories from beverage products, applying label-free packaging to beverage products, and reducing the use of plastic films, targeting a reduction of approximately 2,000 tons of plastic by 2025. The long-term goal is zero plastic use for all products by 2050. They plan to gradually switch plastic products to ‘Tetra Pak’ or ‘bioplastic’ materials.

This content was produced with the assistance of AI translation services.